Q: What is “Title Insurance” and why I recommend it?

 A: The Official Code of Georgia Annotated defines title insurance as follows: 
“Insurance of owners of real property or others having an interest in such real property, or liens or encumbrances on such real property, against loss by encumbrance, defective titles, invalidity, adverse claim to title, or unmarketability of title by reason of encumbrance or defects not excepted in the insurance contract, which contract shall be written only upon evidence or opinion of title obtained and preserved by the insurer.”

Title insurance is issued after a thorough examination of title and an analysis of any claims or encumbrances. An insurer can make the decision to insure a title that is not marketable or even not to insure marketable title.

The Georgia Association of REALTORS® Purchase and Sale Agreement form (F20) states in paragraph 8 that the “seller warrants that, at the time of closing, seller will convey good and marketable title to said Property by general warranty deed.” Paragraph 8b defines “good and marketable title” as “title which a title insurance company licensed to do business in Georgia will insure at its regular rates, subject only to standard exceptions.”

Even if the title search is done perfectly, there may be encumbrances recorded between the time the title examination is performed and the dates on which the warranty deed and the deed to secure debt are recorded. This is called the “gap period” and is insured routinely by some, but not all title insurers. Whether or not the gap is routinely insured may depend on the county in which the property is located and the county’s timeliness in recording documents. Title insurance also protects against encumbrances not properly satisfied at closing and other claims of ownership caused by forged deeds, deeds by minors or incompetent persons, etc.

Rather than a guarantee of marketable title, title insurance is generally described as an indemnity against unmarketability. Even though title insurance will not protect the owner against all risks associated with the purchase of property, buyers are well advised to purchase title insurance. It is a one-time expense which, if needed, can prove to be invaluable.

Lenders require a title policy for their protection. The lender’s policy insures against loss by the lender and its successors. It insures that the lender has an enforceable lien on the property securing the loan. Since the lender’s title insurance policy does not protect the buyer, the buyer should obtain a separate insurance policy, known as an owner’s title policy, to protect the buyer’s ownership interest in the property. The cost of the title insurance policy is a closing cost which is often paid by the buyer. If the owner’s title insurance is written at the same time as the lender’s policy, a simultaneous issue rate is charged, and the expense is less that if the buyer purchased an owner’s title policy at a later date.

The closing attorney will generally offer the buyer the opportunity to purchase the owner’s title insurance policy at the closing meeting. It is a good idea for the agent representing the buyer to be sure a discussion regarding owner’s title insurance is held with the buyer by the closing attorney.